by Vinod Rai
Level One—Integration in Primary School
The importance of working with one’s hands and the dignity of labour and manual work should be emphasized from Class VII onwards. This, following Mahatma Gandhi, is morally, educationally and socially appropriate. Such an emphasis will reduce the traditional Indian middle-class aversion to manual work and blue-collar employment. Soft skills and hands-on training should be part of the curricula for all elementary classes.
Level Two—Academic and Applied Streams in Secondary School
A scientifically designed aptitude test should measure cognitive skills for entry to Class IX and students could be split into academic and applied streams. Those with higher analytical abilities and capacity to think in abstract terms could go for the academic stream, while others should be admitted to the applied stream.
In classes IX and X, all subjects as per current practice should be taught but with different levels of sophistication. For instance, instruction in mathematics could be more abstract in academic stream, while in the applied stream, students can be exposed to illustrations of mathematical principles and the subject could be directly related to the use of mathematics in day-to-day life. There should be easy mobility from the applied to the academic stream. This would remove the stigma usually attached to the applied stream. There could be three categories of schools for classes IX and X: schools offering only the academic stream, those offering only the applied stream and hybrid schools offering both. Over time, enrolments in the applied stream should be at least half of overall enrolments.
Level Three—Professional Higher Secondary Schools
Another aptitude test after Class X should select students on their abilities beyond specific subjects or even linguistic and logical mathematical skills that standard IQ tests entail. These abilities should include musical intelligence, spatial intelligence, bodily kinaesthetic intelligence, interpersonal intelligence, intrapersonal intelligence and natural intelligence as key expressions of human ability that are relevant in a wide variety of professions. This test could be open to students from both academic and applied streams.
Most of the professional schools would be the normal schools of today. With some incremental investment, they can become professional schools. Such schools should provide students with skill sets for jobs or self-employment instead of an aimless pursuit of academic education. Professional schools could offer courses in agriculture and allied sector manufacturing and construction sectors and a wide variety of service-sector jobs.
ITIs could be re-branded as professional schools. As professional schools, ITI-curricula would include vocational skills as well as elements of general education, particularly languages, applied mathematics and soft skills. Some courses offered after classes VIII and XII should be discontinued so that entry to ITIs is uniform after Class X with a two-year duration of the course.
Level Four—Higher Professional Education
After higher secondary, students would transfer to two-year associate degree or three- or four-year bachelors’ degree programmes, offered in professional colleges or general colleges. The duration of these programmes may vary by profession and job roles and entry could be based on national level college-entry tests. Two-year associate degree programmes could be offered in the 12,000 existing stand-alone institutions. Further, about 19,000 to 20,000 colleges (half of the total 39,000 degree colleges) offer three- or four-year programmes in various professional areas and 400 (half of the total 800 universities) offer exclusively professional programmes. All these professional universities are similar to the universities of applied sciences in other countries and higher professional education could come under their purview.
Professional universities or skill universities could be at the apex of professional education offering masters and doctorate programmes in various disciplines. Likewise, general universities that are either unitary or multi-disciplinary could be at the apex of general higher education.
Apprenticeship
Apprenticeship should be tightly integrated with professional education at level three and four. There could be two possible variants of this. In the first variant, students would work for four days in a week, followed by an academic course for one day, while in the other, students could study full-time for a year and a half and then follow up with six months of apprenticeship in a company/organization in a related field. The German model of dual education adopts the first variant and is the preferred model and should be encouraged. Larger focus on practice-oriented education, followed by a brief academic curriculum in short cycles has been found to support skills formation better.
Short-Term Skill Training
Short-term skilling courses would continue to be relevant and important. Such courses would be required for the young people dropping out of schools or leaving the system without any specific skillsets, and for Continuing Education and Training (CET) of those already in the workforce.
It would be preferable to study in small interrelated modules so that there is modular and credit accumulation that provides pathways into formal education and training systems. Short-term skilling opportunities should be locally available. Initiatives need to be taken so that skilling centres of good quality are available in all towns with a population of 10,000 or more throughout the country. Such courses should be fully or substantially funded by the government since they target the most disadvantaged sections of society.
National Qualification and Credit Framework (NQCF)
Finally, for easy mobility across the academic and applied (or vocational/professional) streams, there should be a National Qualification and Credit Framework (NQCF). It should cover both streams and ensure pathways either directly or with bridge courses for students throughout their educational career. Such a framework would provide guidelines for learning outcomes, pathways, assessment and accreditation of qualifications, allowing students to move easily between levels of study and institutions, receiving full credit for previous study. Both streams should be self-sufficient but mutually diaphanous and acknowledged as ‘equivalent however different’.
Communication skills, grooming and personality development should be a necessary part of all education, right from primary to higher professional education. Entrepreneurship education and training should be expanded through schools, colleges and training institutions and in industry clusters to foster job creation.
New Institutional Arrangements
With major changes in the nature of work and rapid technological advances, boundaries between vocational and general education, professional and higher education, conventional and distance or online education have blurred. A new VET model and institutional arrangements should reflect this reality. A large number of bodies, often with overlapping mandates, have emerged both at the national and state levels. There is a need to merge several of them and redefine the mandates of others to achieve effective functional convergence of efforts and have an integrated approach to education and training in the country. New and legacy structures have to be integrated to achieve coherence and effectiveness.
In the VET sector, industry-driven SSCs could play a pivotal role. These should be strengthened to provide inputs on available jobs in each sector. SSCs could develop broad curriculum frameworks and assessment protocols for various job roles. Short-term skilling and professional education in schools and colleges should follow these guidelines and protocols. SSCs could play key roles in mentorship for entrepreneurship.
While a single school up to Class X for both academic and applied streams can continue, for higher secondary, there could be either a single school board with two separate wings or two separate boards for professional and general education. Once ITIs are reclassified as professional schools, state councils for vocational training would not be needed. These could be responsible for short-term skilling courses and renamed as state boards for skill development. A relook at the structure and functions of the National Skill Development Agency (NSDA), the National Council for V
ocational Training (NCVT) and the National Skill Development Corporation (NSDC) is required. Further, both formal education and VET should be brought under a single ministry.
Higher professional education in colleges could be regulated by professional universities, which could continue to be under the oversight of a national regulator. The mandate of ‘All India Council of Technical Education’ (AICTE) that covers engineering education, management education, hotel management, pharmacy, architecture and applied arts can be broadened to include all professional education areas after Class XII. AICTE can be renamed ‘All India Council for Professional Education’ (AICPE) and the body can provide national protocols and standards for coordination across professional universities and colleges. AICPE should work closely with the SSCs.
Regional Directorates of Apprenticeship Training (RDATs) that handle trade apprentices and Boards of Apprenticeship Training (BOATs) responsible for graduate, technician and technician (vocational) apprentices could be merged to achieve better outreach and outcomes and a seamless interface with industry. SSCs could also be involved to increase the outreach.
Summary and Conclusions
A new India requires a new model for skill development with a holistic view of formal education and the VET sector. The latter in India is highly fragmented and underdeveloped. It faces multiple challenges and requires a new strategy and approach. The sector itself has to be scaled rapidly, for which much larger public funding is needed. Improved and fit-for-purpose curricula, better pedagogy and appropriate assessment methods along with robust industry-interface are essential. A large pool of high-quality VET teachers and instructors and ability to attract talent for the same is necessary.
XXIII
Corporate Governance in India: A Giant Leap in the Last Five Years
U.K. Sinha
Globally, the formulation of corporate governance norms and principles, their codification and strict enforcement under laws administered by the governments or regulators, does not have a long history. Developments like active lead by institutional investors, proxy firms or whistleblowers evolved even later. The realization of the importance of corporate governance came about as the role of corporations in the day-to-day life of large sections of population grew—either by their size and the impact they had on the larger economy, or by the way savings of households invested directly or indirectly in these corporations, or how millions of workers are engaged there. Corporate governance as a means to ensure business integrity and to create market confidence became more and more important since the mid-nineties—when global instances of fraud, malfeasance and lack of risk control became increasingly harmful. The Organization for Economic Co-operation and Development (OECD) came out with its first set of corporate governance principles in 1999; these were subsequently revised in 2004 and 2015. In 2002, the US enacted the Sarbanes-Oxley Act.1
The Case at Home
In Asia, in general, and in India in particular, the situation was also compounded by the fact that compared to the rest of the world, the holding of the dominant shareholder has been historically very high. In India, ten years ago the promoter shareholding was close to 60 per cent, which has come down to 50 per cent only recently. The temptation to treat the listed company as an extension of their family business so far as transparency or accountability is concerned was very strong.
Another factor in India, which gave the business promoters and the managements appointed by them high operational freedom was the fact that the political leadership of the newly independent country wanted rapid industrialization. In their anxiety to facilitate economic growth, they did not want to encourage monopolies or consolidation. The government felt it a duty to support the existing management lest the companies were destabilized or acquired by foreigners. For instance, institutional investors like the Life Insurance Corporation of India, the General Insurance Corporation of India or the Unit Trust of India were all government-owned or controlled and the underlying philosophy was not to question or destabilize them as long as the dividends and economic benefits accruing from these corporations were according to government expectations.
Besides, the Companies Act of 1956 regulated the affairs of Indian corporations, which concerned itself more with the procedures of running a corporation, issue of shares, dividends and schemes of arrangements. In the jurisprudence of the fifties, specific focus on corporate governance had little space. Post 1991, the financial sector reforms in India concentrated first on modernizing the trading system, developing world-class exchanges and settlement systems. Reforms in the primary market leading to disclosure-based free pricing, opening up the market for foreign portfolio investors and measures to usher in a competitive domestic funds industry followed.
By early 2000, the realization came that focus on internal governance of corporations, preventing abuse of dominance, public disclosures and dissemination of their affairs to the world at large in a transparent manner can be a very powerful tool to protect the interests of shareholders and help in generating trust in the market and its superintendence. A committee under the chairmanship of industrialist Kumar Mangalam Birla recommended important improvements, which were incorporated by the Securities and Exchange Board of India (SEBI) in 2000 through the mechanism of new provisions in the listing agreement between the stock exchanges and the listed companies. This effort was strengthened by taking a close look at the existing regulatory environment and the emerging challenges and revising the listing agreement based on the recommendations of the committee of N.R. Narayana Murthy— former chairman of the IT company Infosys.2
Efforts Since 2012
Minimum Public Holding, i.e. protection of small shareholders by preventing manipulation and fraudulent practices, requires that the shares under the free float, the proportion of stocks being traded in the market, for buying and selling, are large in number. Indian companies have comparatively large holdings by dominant shareholders. There were examples where the free float was even less than 10 per cent. One of the early measures taken was to change this situation. In 2012, SEBI insisted that all listed companies must reach the goal of Minimum Public Shareholding of 25 per cent within a year. The scheme was seriously monitored and implemented. Even state-owned enterprises were not spared, although they were given a longer compliance time period. Companies that failed to meet the deadline were promptly penalized giving a clear signal to the outside world about minority protection. Earlier, SEBI came out with a revised takeover code. One of the important provisions was to discontinue the earlier practice of paying a non-compete fee3 to the selling shareholder. This ensured that the minority shareholder got the best price and there was no discrimination in favour of the selling shareholder.
SEBI came out with a consultation paper in 2013—Consultation Paper on Corporate Governance—that proposed the strengthening of the governance framework.4 The proposals recommended an expansion in the role of the audit committee, a compulsory whistle-blower mechanism, prohibition of stock options to independent directors, performance evaluation of all directors and at least one woman director on the board of the company.
The Companies Act of 1956 was replaced by the Companies Act of 2013, which had for the first time specific provisions on corporate governance. The legislation drew heavily from the Consultation Paper of SEBI, mandating many of the provisions even for companies that are not listed on the stock exchanges. Specific provisions were made regarding the eligibility, role and functions of independent directors, specific procedures for dealing with related party transactions and providing a ‘say’ to minority shareholders, mandatory constitution of committees and other provisions for transparency and accountability, including a provision for performance evaluation of independent directors. Provisions for e-voting for shareholders’ meeting have since been made mandatory.
SEBI’s New Corporate Governance Norms
Laws in India mandate that while the criteria provided in the Companies Act are applicable to all, SEBI is free to treat these as minimu
m applicable provisions and can impose additional conditions for listed companies. From October 2014, SEBI introduced a number of additional requirements for listed companies.
Some of these criteria are:
Independent directors
An independent director who has already served for a period of five years or more shall be eligible for reappointment for one more term only.
The maximum number of companies in which a person can serve as an independent director has been restricted to seven (instead of ten as per the Companies Act).
Related Party Transactions (RPTs)
A wider and more comprehensive definition with elements of Companies Act, 2013 and (Ind AS) 24.
All RPTs shall require prior approval of the audit committee.
Specific criterion provided for recognition of material RPTs: 20 per cent of net worth.
5 per cent of annual turnover.
The companies shall prepare and disclose RPT policy in the annual report.
Others
The principles of corporate governance have been laid down in the listing agreement, broadly based on OCED principles of corporate governance.
Companies have been mandated to provide suitable training to independent directors and the details of such training imparted shall be disclosed in the annual report.
Internal auditor to report to audit committee as a non-mandatory good governance practice.